Cochran v. Norkunas
919 A.2d 700 · Court of Appeals of Maryland · 2007
Facts
Petitioners, Rebecca Cochran, et al. ("Buyers"), expressed interest in purchasing property at 835 McHenry Street, Baltimore, Maryland, owned by Respondent Eileen W. Norkunas ("Seller"). On March 7, 2004, Buyers, assisted by a real estate agent, drafted and signed a handwritten letter of intent outlining key terms of an offer, including a price of $162,000 and a $5,000 deposit. The letter stated that a "standard form Maryland Realtors contract will be delivered to Seller within 48 hours." The Buyers presented the letter of intent and the $5,000 deposit check to Ms. Norkunas, and both parties signed the letter of intent, though the Seller never deposited the check. Shortly after, the Buyers' agent sent Ms. Norkunas a package containing a "Residential Contract of Sale" and several addenda, which incorporated terms from the letter of intent and added new provisions. Ms. Norkunas signed the contract and addenda on most signature lines but crossed out and did not sign the financing contingency provisions. She did not return the signed documents to the Buyers or their agent, nor did she otherwise communicate her acceptance. After about a week, Ms. Norkunas informed the Buyers that she was taking the property off the market.
Procedural history
The Buyers initially filed suit seeking specific performance of the letter of intent. During discovery, the Buyers learned that Ms. Norkunas had privately signed portions of the contract documents. The Buyers then filed an amended complaint seeking specific performance of both the letter of intent and the contract of sale. The Circuit Court for Baltimore City granted summary judgment in favor of the Buyers, ordering specific performance. Ms. Norkunas appealed, and the Court of Special Appeals reversed the Circuit Court's decision, holding that no enforceable contract was formed. The Buyers then filed a petition for a writ of certiorari, which this court granted.
Issue
1. Whether a negotiated letter of intent, containing essential terms and executed by all parties, constitutes an enforceable agreement under Maryland law when it indicates a future formal contract. 2. Whether a standard real estate contract, signed by the seller but never delivered or communicated to the buyers, constitutes an enforceable agreement.
Holding
The letter of intent is unenforceable because the parties did not intend to be bound by it alone. The standard Maryland Realtor's Contract is also unenforceable because the Seller did not accept it by communicating her assent to the Buyers. The judgment of the Court of Special Appeals is affirmed.
Rule
Contract formation requires a manifestation of mutual assent, which includes both an intent to be bound and definiteness of terms. If parties do not intend to be bound until a final, formal agreement is executed, no contract exists until that execution. The most important factor in determining intent to be bound is the language of the preliminary agreement itself. Acceptance of an offer is requisite to contract formation and requires a meeting of the minds, which must be communicated to the offeror. Private signing of a contract without transmitting the documents or otherwise communicating acceptance does not create an enforceable agreement, as silence or inaction generally does not constitute acceptance unless specific exceptions apply.
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